New MSME policy sets right tone for business

A representative of the micro small and medium enterprise (MSME) sector is endorsing the policy paper introduced to Parliament last month as a good foundational document.

The new MSME and Entrepreneurship Policy assesses areas that have traditionally been problematic for entrepreneurs, including financing and access to credit, taxes, and business-development support, among others.

It also formalises the definition of the sector. Studies around which the policy was formulated had three different categorisations for Jamaican MSME businesses.

But out of a workshop co-hosted by the Ministry of Industry, Investment and Commerce and Mona School of Business & Management in July 2011, the following MSME definition was agreed for Jamaica:

Micro business: 5 employees or less and sales of up to J$10 million;

Small business: 6-20 employees and sales ranging above J$10 million to J$50 million; and

Medium enterprise: 21-50 employees and sales above J$50 million up to J$150 million.

President of the MSME Alliance Donovan Wignal called it a "good researched document."

"We applaud the efforts of the minister in going this way. It really speaks to the financing for the sector; it speaks to the growth and sustainability of small businesses going forward," Wignal told the Financial Gleaner.

The policy document was tabled by Minister of Industry, Investment and Commerce Anthony Hylton in mid-July.

Its mission is "to inculcate a deep-seated culture of entrepre-neurship in MSMEs, reduce bureaucracy to improve the ease of doing business, build capacity, and improve timely and relevant support by forging strategic partnerships and linkages with key sectors within the society," said the accompanying ministry paper tabled by Hylton.

The current size of the MSME sector is unknown, but at last estimate in 1996 the count amounted to 93,110 businesses. The majority of the businesses were found to be operational in the wholesale and retail trade, 55.7 per cent, followed by community and personal services, 23.3 per cent.

More recently, in 2011, Statin estimated that 'own account workers' - that is, persons who operate their own businesses but do not employ paid labour - amounted to just under 36 per cent of the employed labour force. That approximates 391,000 persons.

Among the issues limiting the MSME sector cited in the policy paper, affordable financing and acceptable collateral were cited as "the most important factor determining the survival and growth", not only in Jamaica but across developed and developing markets.

As such, the policy aims to introduce new financing options and expand the categories of acceptable collateral beyond the traditional to include receivables and inventory - subject to discussions with the Jamaica Bankers Association - among other strategies.

Opposition spokesman on industry, Karl Samuda, indicated at the tabling of the policy that the issue of collateral remains one of the most egregious.

He argued that the established banks in Jamaica do not give enough support to small businesses, and cited it as a failing of the lenders.

"They are reluctant to do it because they have been delinquent in providing a structure within their banking establishments to attend to the needs of small businesses," Samuda said.

An implementation plan is to be developed to execute the MSME Policy prescriptions. The policy document will be evaluated and refined after the first year of implementation, and reviewed every two years after that.

roxanne.williams@gleanerjm.com